fa Aish 7_ cnan dai - min Ranadut hI — Procurement an Chapter 6 \_Supplier Selection aa importance and steps of the procurement process Learfiing Outcomes Key Terms Procurement Cycle Criteria of Supplier Selection Mult-crteria Decision Making TOPSIS ZA rapter Outline Introduction \ sj Procurement Proce3s- [ Supplier Selection ——=—_—V~—_— “Ly‘The decision-maker has wanted che supplie to the company and the lead time co be smal determined as which supplier 02271 04336 03717 03304 0.3097 01858 0.3923 02478 0.2994 02788 Rica =| ‘The best values in columns of the Vien matiix => AY = ‘The worst values in columns ofthe Visa matiix 1°0:20 w3=0.50 and w=0,30, respectively. In this by using the TOPSIS method. 01198 05971, 01990 03981, 02787 03583 0.1990 00796 o3nes 0.2787 1 Se Procurement and Supplier Selection $F capacity to be large and the distance fiom the supplier Weights represent the importance of these criteria were ‘case, the decision-maker should select (0.8374), the decision-maker should select the Supplier 1 according to M0 3 1 20 15 4 wo s 2 160 10 0 1507 6 % 9 2 190 5 2 2 2 5 Ms 8 0 15 7 3) 1005 0454 0.0597 03015 04020 010867 02986 0.12060 0.2010 0.0743 00995 906030 0.0000 0.0661 0.1990 0,00000 06030 Wrn=| 00619 0.1393 0.18091 02010 9.0372 0.1791 0.06030 0.2010 0.0785 00595 9.06030 05025 0.0496 orsore | 1.0000 90599 01592 0,000 03015 00558 01393 0.05045 9.0867 0,0398 0,000 = A= 00372 02986 9.15001 0.2826 0.8374 00781 02147 02357 07332 0.2085 05649 ongi2 c= | ores 0.1697 05152 02364 07349 0.2608 0.6268 02295 06521 0.1841 os7isSupply Chain Management review had TOPSIS confirm the answers proposed by other MCDM methods, The advantage of its simplicity and its abiliry to maintain the same amount of steps regardless of problem size has allowed it to be utilized quickly to review other methods or to stand on its own as a decision making tool. TOPSIS is ‘an approach co identify an alternative which is closest to the ideal solution and farthest to the negative ideal solution in a multi-dimensional computing space’ (Qin et al., 2008). ‘An ideal solution for multi-criteria decision problems, the hypothetical option with the best values that can be reached in all criteria; the anti- ideal solution is defined as the hypothetical option with the worst values in all criteria. The option chosen with TOPSIS should be both the closest to the ideal solution and the farthest to the anti-ideal solution. The method consists of six steps Before proceeding ¢6 the first step, the decision matrix must be created by the decision-maker. The rows of the decision matrix correspond to options, and the columns correspond to criteria to be used in decision making. It is created by evaluating each option according to each criterion. ‘The size of the matrix is mxn to indicate the number of options, ‘m, n the number of criteria, Step 1: Creating the standard decision matrix. The standard decision matrix (R,,.,), is calculated using the decision matrix (X,,,,,) according to the ie saation of ideal and anti-ideal Step 3: Determine eal solution (A*) and are defined as follows. Av ‘best’ values in anti-ideal solution aa .s the hypothetical option s ee pee Av is another hypothedical option that takes ‘worst’ values in each eriterion. The best Tecchreanced ommcline ete VA en the best values, A® and the worst values are A. Step 4: Calculation of the separation measure, In this step, Euclidian distance relation is used for the measure of separation between alternatives. The distances of each option from the ideal solution (5¢) and anti-ideal solution (S7) are calculated by the following formulas. Sr Oy, ST =YLijen @y-¥5F Step 5: Calculating the relative closeness to the ideal solution. The relative closeness to the ideal solution (G,) is calculated as follows: = G i Sp +S) Here G, will take a value in the range (0,1). Step 6: Sorting options. When the relative closeness to the ideal solution (G,) values of the options are sorted from large to small, and the most preferred options will be in the top rows. ] irporens e As an option approaches the ideal solution, the relative proximity value to the ideal solution (G) approaches 1. If G, = 1, the ‘option is equal co the ideal solution. An Example to Solve the Supplier Selection Problem With TOPSIS Method To select the most proper supplier among ten candidate suppliers, the decision-maker has determined three criteria as the capacity of the supplicr, the distance from the supplier to the company, and the lead time. The decision matrix (xjo,3) is given below.Procurement and Supplier Selection Learning Outcomes aaa DUK en eee eam BTS OT Wiey Associate companies’ 5 ‘What is th vppliclcion pce | siemens and sip] | She super ein 2 selection process with each Process that you observe in J other | real life, a TOOLS AND TECHNIQUES IN HE SUPPLI E LS ECHN Ss IER SELECTION Multi-criteria Decision Making peso ea Se Sa used for supplier selection can be divided into three , namely, multi-criteria decisi ing (MCDM), artificial intelligence (Al), and mathematical Programming (MP) (Chai & Ngai, 2020). Among these streams, MCDM, which is used to determine che ‘most suitable one among the alternatives by considering many criteria, stands out. ‘There are many MCDM methods such as Analytic Hierarchy Process (AHP), ELECTRE, PROMETHEE, & inporane and Technique for Order Preferences by Similarity co e Ideal Solutions (TOPSIS), etc. in the literature. Chai and TOPSIS is one of the mos preferred MSDM Ngai (2020) and Velasquez and Hester (2013) examined methods because ofits features, such as its these techniques in detail in their papers. One of these simple process, case of use, the fact that che techniques, TOPSIS, has a simple process, it is easy to use, number of steps does nor increase regardless and the number of steps remains the same regardless of the _ ofthe number of criteria, and use of Euclidean. number of criteria. Its use of Euclidean Distance does not Distance. consider che correlation of atcributes; itis difficult to weigh and keep the consistency of judgment. TOPSIS Method TOPSIS is ‘an approach to identify an alternative which is closest to the ideal solution and farthest to the negative ideal solution in a multi-dimensional computing space’ (Qin et al., 2008). It has numerous advantages. For example, it has a simple process. Itis easy to use and programmable. The number of steps remains the same regardless of the number of attributes (Ic, 2012). TOPSIS has been used in supply chain management and logistics, and manufacturing systems, business and management, environmental | management, and water resources management. This plication popular. Many of the uses seen in the literature